What Is the Fate of the Consumer Financial Protection Bureau?

The brainchild of Elizabeth Warren faces an uncertain future under Donald Trump.

Photograph by Brendan Smialowski / NYT via Redux

Ever since the Consumer Financial Protection Bureau was created, in
2010, certain Republicans in Washington have been fixated on shutting it
down, or at least dramatically reducing its power. The agency had too
much autonomy, they argued, and was part of a regulatory system that was
discouraging banks from lending money, which in turn was inhibiting
economic growth. The target of much of their criticism was the agency’s
director, the former Ohio Attorney General Richard Cordray. Amid
speculation that Cordray might leave his post a few months early to
pursue a run for governor in his home state, the C.F.P.B.’s antagonists
could soon have their wish.

Those same Republican critics may be in a position to choose the next
director of the C.F.P.B., who could deliver on their dream of
diminishing the agency. Incredibly, according to the Los Angeles
Times,
President Trump may be poised to appoint his Wall Street–friendly
Treasury Secretary, Steven Mnuchin, as the bureau’s interim head. These
are disheartening developments for anyone concerned about the integrity
of the financial system.

The C.F.P.B. was created through legislation passed by Congress in
response to the 2008 financial crisis, and it has been a small but
effective bulwark against the wave of deregulation and rule-loosening
that resulted from Trump’s election and his appointment of former bankers
and lobbyists to key regulatory and policy positions. The agency was
controversial from the start, partly because it sprang from the mind of
Elizabeth Warren, who initially described
it as a “Financial Product Safety Commission.” The banking industry
immediately mobilized in opposition, and its representatives found
sympathetic listeners among congressional Republicans. (Representative
Jeb Hensarling, of Texas, described the C.F.P.B. as a “rogue federal
agency,” and “a tyranny” in an
editorial in the Wall Street Journal in February.) Warren rose to national
celebrity as a prominent critic of the financial industry and was seen
as the obvious candidate to lead the C.F.P.B. once it was established.
When President Obama named Cordray to the role instead, it was an
acknowledgment that Warren was unlikely to win confirmation in the
Senate. Warren, of course, is now a senator herself, and Cordray has
been playing the part of a Warren proxy ever since.

The C.F.P.B.’s mandate was to protect consumers from abuses by companies
in the financial sector, including banks, mortgage lenders,
debt-collection agencies, payday lenders, and others. While some of its
detractors argue that the agency has not focussed enough on the kinds of
frauds that led up to the financial crisis, there is no doubt that it
has played an important role in keeping consumers safe from certain
kinds of financial exploitation—particularly consumers at mid-to-lower
income levels. Under Cordray’s leadership, the C.F.P.B. introduced a
rule prohibiting banks from forcing customers to resolve disputes
through arbitration, which is generally more advantageous to big banks
than having disputes settled in court. The agency also created
guidelines that make it easier for consumers to avoid being charged
exorbitant overdraft fees, reshaped mortgage-lending rules, and
collected billions of dollars in consumer refunds and debt relief
through its enforcement activity. Its most high-profile accomplishment
was the hundred-million-dollar fine levied against Wells Fargo Bank,
which helped bring attention to the bank’s practice of pressuring its
sales people into opening thousands of unauthorized customer accounts.
(The practice was first disclosed in the Los Angeles
Times, in 2013.).

Since then, Wells Fargo has been embroiled in a cascading series of
scandals and revelations, and multiple lawsuits remain unresolved.
Back in September, Warren had the opportunity to question—and publicly
shame—the then C.E.O. of the bank, John Stumpf, as he
testified before the Senate Banking Committee. “O.K., so you haven’t resigned, you
haven’t returned a single nickel of your personal earnings, you haven’t
fired a single senior executive,” Warren said to a squirming Stumpf.
“Instead, evidently, your definition of ‘accountable’ is to push the
blame to your low-level employees who don’t have the money for a fancy
P.R. firm to defend themselves.” Video of the back-and-forth went viral,
as viewers took pleasure in seeing an actual banker in an expensive suit
being reprimanded like a misbehaving child.

On Monday, Cordray delivered a speech at the Cincinnati A.F.L.-C.I.O.
Labor Day picnic, which the press
portrayed as a warmup campaign event. “Have you ever been treated unfairly by a
large, often faceless, company? When that happens, it can feel like the
deck is stacked against you,” he said, according to his prepared
remarks. He listed off the C.F.P.B.’s various accomplishments on behalf of
average consumers, and spoke about how corrupt bank practices could
exacerbate income inequality. He ended by quoting Eleanor Roosevelt,
saying, “On Labor Day, we must remember that this nation is founded to
do away with classes and special privilege, that employer and worker
have the same interest, which is to see that everyone in this nation has
a life worth living.”

It appears that Cordray has been an astute student not just of the
political tactics of his patron, Elizabeth Warren, but also of those
employed by the President, who has deployed images of the “forgotten”
men and women of America—victims of an unfair financial system—to serve
his own purposes. So far, Democrats have proved to be mostly hapless in
capitalizing on the rage that many Americans still feel toward Wall
Street, big banks, and an economic system that inhibits most people’s
advancement. If Cordray runs for higher office, it will give Democrats
another opportunity to figure out a winning formula.